SD - SandRidge Energy

[alertmeipp]

Almost 30k per acres? This can't be right. Anyone know NBL's acres' location??

 

 

 

http://www.sacbee.com/2012/07/24/4654467/noble-energy-agrees-to-sell-permian.html

 

 

HOUSTON, July 24, 2012 -- /PRNewswire/ -- Noble Energy, Inc. (NYSE: NBL) today announced that it has signed a definitive agreement to sell certain oil and natural gas properties in the Permian Basin to Sheridan Holding Company II, LLC, a privately held Houston based oil and gas company, for $320 million.  The transaction has an effective date of April 1, 2012 and is expected to close in August 2012, subject to customary closing conditions and adjustments.

 

The properties include Noble Energy's interest in about 250 producing wells on approximately 11,000 net acres.  As of the effective date, net daily production was over 1,500 barrels of oil equivalent per day consisting of more than 90 percent crude oil and natural gas liquids.     

 

David L. Stover, Noble Energy's President and COO, commented, "The sale of our Permian assets is a continuation of our previously announced divestiture plan.  Sales of our non-core assets allow us to focus on the developments within our core areas.  Our teams have worked diligently and we are pleased with the pace of divestitures and value received."

 

Tudor, Pickering, Holt & Co. advised Noble Energy on the transaction.

 

Noble Energy is a leading independent energy company engaged in worldwide oil and gas exploration and production. The Company has core operations onshore in the U.S., primarily in the DJ Basin and Marcellus Shale, in the deepwater Gulf of Mexico, offshore Eastern Mediterranean, and offshore West Africa. Noble Energy is listed on the New York Stock Exchange and is traded under the ticker symbol NBL. Further information is available at www.nobleenergyinc.com.

 

Read more here: http://www.sacbee.com/2012/07/24/4654467/noble-energy-agrees-to-sell-permian.html#storylink=cpy

[AZ_Value]

Almost 30k per acres? This can't be right. Anyone know NBL's acres' location??

 

 

 

http://www.sacbee.com/2012/07/24/4654467/noble-energy-agrees-to-sell-permian.html

 

 

HOUSTON, July 24, 2012 -- /PRNewswire/ -- Noble Energy, Inc. (NYSE: NBL) today announced that it has signed a definitive agreement to sell certain oil and natural gas properties in the Permian Basin to Sheridan Holding Company II, LLC, a privately held Houston based oil and gas company, for $320 million.  The transaction has an effective date of April 1, 2012 and is expected to close in August 2012, subject to customary closing conditions and adjustments.

 

The properties include Noble Energy's interest in about 250 producing wells on approximately 11,000 net acres.  As of the effective date, net daily production was over 1,500 barrels of oil equivalent per day consisting of more than 90 percent crude oil and natural gas liquids.     

 

David L. Stover, Noble Energy's President and COO, commented, "The sale of our Permian assets is a continuation of our previously announced divestiture plan.  Sales of our non-core assets allow us to focus on the developments within our core areas.  Our teams have worked diligently and we are pleased with the pace of divestitures and value received."

 

Tudor, Pickering, Holt & Co. advised Noble Energy on the transaction.

 

Noble Energy is a leading independent energy company engaged in worldwide oil and gas exploration and production. The Company has core operations onshore in the U.S., primarily in the DJ Basin and Marcellus Shale, in the deepwater Gulf of Mexico, offshore Eastern Mediterranean, and offshore West Africa. Noble Energy is listed on the New York Stock Exchange and is traded under the ticker symbol NBL. Further information is available at www.nobleenergyinc.com.

 

Read more here: http://www.sacbee.com/2012/07/24/4654467/noble-energy-agrees-to-sell-permian.html#storylink=cpy

 

Holy @$#%!!

$30K per acre? This can't be right...

What are we missing? The press release definitely says 11,000 acres for $320 million

 

http://investors.nobleenergyinc.com/releasedetail.cfm?ReleaseID=694563

 

 

 

 

[alertmeipp]

apparently, the range has been 1.6k to 17k, but 300k is very high so I was wondering if their acres are close to SD or CHK. And the production # is mini-muscle compared to CHK or SD.

 

ODD.

[gordoffh]

This Quarter results look very good indeed. Ward appears to be following plan and the oil seems to be there. This has been frustrating the past while but hard to see this stock not moving higher with continued  results such as this. The conference call tomorrow should be interesting.

 

http://finance.yahoo.com/news/sandridge-energy-inc-reports-financial-200500313.html

[Kiltacular]

gordo (or anyone else),

 

Any knowledge of why the market has responded today as it has?

[gordoffh]

They don,t like ward? DOR purchase,not selling additional acreage ,too much debt  -  he does change things up a little but man I don,t see too much not to like with this quarter - stock is heavily shorted and perhaps subject to some shenanigans . I have more than enough but still bought more with the opening sell off. Had it for awhile and despite the the stock price disappointment so far I still am in for the long haul. For the past year the company and the oil play they are in show promise to me anyway and it is a play on gas as well.

[Kiltacular]

They don,t like ward? DOR purchase,not selling additional acreage ,too much debt  -  he does change things up a little but man I don,t see too much not to like with this quarter - stock is heavily shorted and perhaps subject to some shenanigans . I have more than enough but still bought more with the opening sell off. Had it for awhile and despite the the stock price disappointment so far I still am in for the long haul. For the past year the company and the oil play they are in show promise to me anyway and it is a play on gas as well.

 

Thanks gordo.  It seems like the shorts really went after this at the same time the CHK issue arose though I haven't followed closely.

[alertmeipp]

Some investors want more conservative balance sheet these days and something more predictable.

 

The 2012 cap exp is now at 2.1b and another funding gap to fill..

 

This will remind ppl that SD is little CHK although we all know SD has way more oil. Any way, LEAPS.

 

[Myth465]

Another solid quarter, another disappointing stock price reaction.

 

Ward is leading and Mr Market is doing his job. Analyst are freaked out by moves in Capex and his reluctance to sell acreage. I see his perspective, they are exceeding drilling results, dont want to do more trusts (I predict 1 more) because it complicates the story / balance sheet, dont want to sell the original miss for a few different reasons, and dont want to sell the new miss without the data / it being proved up. If the data is too good (such as several 2k wells) they still wont want to sell it for $5k-$8k an acre.

 

Oil prices are up and will trend higher, rig release days down, drilling cost down, drilling technique improving, and spacing will move to 4 vs 3 providing 20%+ more locations. Why sell the acreage if we can fund it with debt and be under 3x EBITDA is what Ward is thinking. Why not move up capex if drilling is going well and we have to frontload more infrastructure to hold all the acreage.

 

Mr. Market wants a man who will stick to a plan, and wants debt to be reduced. The plan seems pretty solid to me and I think the SP should be higher. I want to buy more, but will likely role over my leaps to 2015 when they come out. This will have to go up at that point, but prior its anyones guess.

 

I personally would like to see a sell of the WTO or more importantly the Permian. Pricing for Permian acreage is solid and its all proved up. Why not sell it for 60% - 75% value, buy some more Gulf (how can you not like buying oil at 1.1 cash flow) and stick to the Miss and Gulf with the WTO in your back pocket for a gas recovery. At least do one more Permian trust to fully fund 2013 and part of 2014.

 

Either way Ward knows what he is doing and I like the moves he is making. We have several catalyst (CHK has assets in both our main areas for sell, Devon is moving big into the Miss, oil prices, ect). I plan to sit back and just enjoy the show.

[alertmeipp]

Another solid quarter, another disappointing stock price reaction.

 

Ward is leading and Mr Market is doing his job. Analyst are freaked out by moves in Capex and his reluctance to sell acreage. I see his perspective, they are exceeding drilling results, dont want to do more trusts (I predict 1 more) because it complicates the story / balance sheet, dont want to sell the original miss for a few different reasons, and dont want to sell the new miss without the data / it being proved up. If the data is too good (such as several 2k wells) they still wont want to sell it for $5k-$8k an acre.

 

Oil prices are up and will trend higher, rig release days down, drilling cost down, drilling technique improving, and spacing will move to 4 vs 3 providing 20%+ more locations. Why sell the acreage if we can fund it with debt and be under 3x EBITDA is what Ward is thinking. Why not move up capex if drilling is going well and we have to frontload more infrastructure to hold all the acreage.

 

Mr. Market wants a man who will stick to a plan, and wants debt to be reduced. The plan seems pretty solid to me and I think the SP should be higher. I want to buy more, but will likely role over my leaps to 2015 when they come out. This will have to go up at that point, but prior its anyones guess.

 

I personally would like to see a sell of the WTO or more importantly the Permian. Pricing for Permian acreage is solid and its all proved up. Why not sell it for 60% - 75% value, buy some more Gulf (how can you not like buying oil at 1.1 cash flow) and stick to the Miss and Gulf with the WTO in your back pocket for a gas recovery. At least do one more Permian trust to fully fund 2013 and part of 2014.

 

Either way Ward knows what he is doing and I like the moves he is making. We have several catalyst (CHK has assets in both our main areas for sell, Devon is moving big into the Miss, oil prices, ect). I plan to sit back and just enjoy the show.

 

Why go with the LEAPS? You are losing time value on it.

[twacowfca]

Myth, please comment on today's big $800M + 7.50% coupon debt sale.  What are the economics, compared to setting up another trust?

 

Thank you.

[QLEAP]

I am not Myth but I think the trust has couple of disadvantages

 

1) You need a lot of proved reserves for the trust and its hard to do that on a big scale. Besides, the money raised will be much lower than wait a couple of years, drill and prove. SD values the Miss at 15k per acre (currently going at 4k per acre) and if they are able to raise even half of that, its a big hit

 

2) It makes the financials more murkier with the NCI and hedges. There are already a lot of moving parts here that it makes things more complicated.

 

Having said that, my guess is that SD is probably looking at another trust at a smaller scale (500 million). More likely that part of the notes raised will be used for GoM assets.

 

Tom is always looking 3 yrs away and is not scared to leverage the balance sheet while I think the analysts really want a few asset sales in 3-6 months to deleverage.

 

I am still trying to figure out where the risks are when you hedge 81% of your oil production generating 100% returns when you raise debt at 7.5%. Rising NG prices is a nice call option here.

[Myth465]

They are similar, but debt is better in terms of economics. Sentient is a whole other issue.

 

The cost of 10 year debt of $1.1 billion is 7.5%. The public would demand something similar via trust, but would also get the upside of monster wells, improved drilling cost savings, 4 acre spacing, and rising oil prices. SD would also take a proved reserve and production hit as the trust was setup. It would also be another entity to account for, track, and explain.

 

I would say in terms of economics Ward has it right.

 

Debt - gives you full $15k PV per acre and can be funded under 10% and handled under stated EBITDA goals.

Trusts - can be brought to market at less than 10% and help put a value on the remaining acreage. Helps delever the company.

JV - Gives you the least PV value, but is easier to deal with from an accounting perspective. Also helps delever the company.

 

I think the offer went well and am very pleased with the stock reaction (we didnt tank massively). I think the offer was originally for $500 million and was mainly a roll over deal. It was up-sized due to interest and up-sized again (my opinion). I like it because we shouldn't have to raise debt anytime soon, and have pushed out maturities. This should please analyst. I dont like it because it leaves Ward with quite a bit of cash on hand. He will do whats best for the company over 3 years, but it will likely hurt the share price if he does anything more than drill wells. I would like to see them call the 2016s at around 10% if possible.

 

Buying Gulf properties at 1.1 cash flow is a cant lose deal inmo. DOR was a fair price, the only way to get value from that deal is to continue buying assets at less than 2x CF to offset the fair price paid. Ward likes what he sees in the miss and may have the top tree US producing wells in the last 3 years. I think he is doing the right thing. Also CHK is selling quite a few assets, best to wait and let them set a floor.

 

The only exception is I would sell the Permian. Its oily, fully proved up, and the returns seem to be dropping each quarter. Ward is a value investor and wants to bottom feed in the oil patch. Why not give up some upside and sell something you got cheap now that everyone wants oil. I would love a sell of the Permian, massive stepped up drilling in the Miss, and several Gulf acquisitions. Thats just me though.

 

I think QLEAP is right, we may see one more trust, though Ward has really de-emphasized trusts and the JV.

[Packer16]

I was looking at this security and it has a nice current yield 8.0% and upside with conversion into about 12.5 shares/preferred share.  You have a value investor running SD and FFH has a large stake.  I own the common but the preferred provides a nice yield while you wait (similar to some of Buffet's investments). 

 

Another interesting feature is as SD's plan plays out the coverage and leverage ratios will change this from a B credit to a BB or higher credit, so the bond floor will rise (the YTM will fall) in addition to the conversion feature increasing in value.

 

Has anyone looked at these securities?  TIA.

 

Packer

[PlanMaestro]

I was looking at this security and it has a nice current yield 8.0% and upside with conversion into about 12.5 shares/preferred share.  You have a value investor running SD and FFH has a large stake.  I own the common but the preferred provides a nice yield while you wait (similar to some of Buffet's investments).  Has anyone looked at these securities?  TIA.

 

Packer

 

Very interesting. Who was the one looking for a long/short?

 

SandRidge Energy, 8.50% Convertible Perpetual Preferred Stock, liquidation preference $100 per share, not redeemable at the issuer's option at any time, and with no stated maturity. Cumulative distributions of 8.50% ($8.50) per annum paid in cash or common stock are paid quarterly on 2/15 & 8/15 to holders of record on the record date fixed by the board (NOTE: the ex-dividend date is at least 2 business days prior to the record date). Dividends paid by the preferred are eligible prior to 1/1/2011 for the 15% tax rate on dividends under normal holding restrictions and are also eligible for the dividends received deduction for corporate holders. The preferred shares are convertible any time at the holder's option into 12.4805 common shares of SandRidge Energy Inc. (NYSE: SD), an initial conversion price of $8.0125 per common share. On or after 2/20/2014, if the price of the common stock exceeds 130% of the conversion price for 20 of any 30 consecutive trading days, the company may, at their option, cause the preferred shares to be converted into common shares at the then prevailing conversion price. In regard to the payment of dividends and upon liquidation, the preferred shares rank equally with other preferreds and senior to the common shares of the company.

 

 

Prospectus http://www.sec.gov/Archives/edgar/data/1349436/000095013409000802/h65499exv3w1.htm

[PlanMaestro]

More details and formulas in the prospectus

 

The Conversion Price shall be subject to the following adjustments (except as provided in Section 7(e)):

 

(i) If the Company pays a dividend (or other distribution) in shares ...

 

(ii) If the Company issues to all holders of shares of the Common Stock rights, options or warrants...

 

(iii) If the Company subdivides, combines or reclassifies the shares of Common Stock into a greater or lesser number of shares of Common Stock...

 

(iv) If the Company makes a distribution consisting exclusively of cash to all holders of the Common Stock, excluding ...

 

(v) If the Company or any of its subsidiaries successfully completes a tender or exchange offer for the Common Stock that involves the payment of consideration with a value per share of Common Stock exceeding the average Closing Sale Price ...

 

(vi) If the Company distributes to all holders of shares of Common Stock evidences of indebtedness, shares of capital stock (other than Common Stock) or other assets....

 

(vii) Notwithstanding anything herein to the contrary, no adjustment under this Section 7(d) need be made to the Conversion Price unless such adjustment would require an increase or decrease of at least 1% of the Conversion Price then in effect. Any lesser adjustment shall be carried forward and shall be made at the time of and together with the next subsequent adjustment, if any, which, together with any adjustment or adjustments so carried forward, shall amount to an increase or decrease of at least 1% of such Conversion Price; provided, however, that with respect to adjustments to be made to the Conversion Price in connection with cash dividends paid by the Company, the Company shall make such adjustments, regardless of whether such aggregate adjustments amount to 1% or more of the Conversion Price, no later than February 15 of each calendar year.

 

(viii) The Company reserves the right to make such reductions in the Conversion Price in addition to those required in the foregoing provisions as it considers advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights will not be taxable to the recipients. ....

[Myth465]

I think Prem was on to something with SD preferred and am planning to allocate a good chunk of capital to them once my cash flow is sorted. SD will double or triple at some point but you get paid 8% while you wait. Ward is focused on the long term and make good decisions for SD but the payoff will be a few years off. Much better value here then common or options inmo.

[bargainman]

I think Prem was on to something with SD preferred and am planning to allocate a good chunk of capital to them once my cash flow is sorted. SD will double or triple at some point but you get paid 8% while you wait. Ward is focused on the long term and make good decisions for SD but the payoff will be a few years off. Much better value here then common or options inmo.

 

What is the trading symbol for this?

[stahleyp]

I think Prem was on to something with SD preferred and am planning to allocate a good chunk of capital to them once my cash flow is sorted. SD will double or triple at some point but you get paid 8% while you wait. Ward is focused on the long term and make good decisions for SD but the payoff will be a few years off. Much better value here then common or options inmo.

 

What is the trading symbol for this?

 

The 8.5%'s ticker is SDRXP. Cusip is 80007P406

[muscleman]

I think Prem was on to something with SD preferred and am planning to allocate a good chunk of capital to them once my cash flow is sorted. SD will double or triple at some point but you get paid 8% while you wait. Ward is focused on the long term and make good decisions for SD but the payoff will be a few years off. Much better value here then common or options inmo.

 

I just started looking into SD today, after I got burned with the ATPG story. :-[

This one seems to be delivery solid production growth results, unlike ATPG, which kept saying turnaround is about to happen, but never happened.

I also like the fact that Prem bought a lot of it.

However I am a bit concerned whether the CEO's compensation is so high. That seems troubling.

Also I am curious how much funding gap there is to realize their 3 year plan. They said funding is already in place for 2012 and 2013, so how about 2014?

 

[gordoffh]

Latest presentation reveals a lot to like about the mid continent play - perhaps tom ward is correct and it is time to harvest - for us longs it has been a volatile ride - even market is reacting positively

 

http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTUxNjUxfENoaWxkSUQ9LTF8VHlwZT0z&t=1

[muscleman]

Latest presentation reveals a lot to like about the mid continent play - perhaps tom ward is correct and it is time to harvest - for us longs it has been a volatile ride - even market is reacting positively

 

http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTUxNjUxfENoaWxkSUQ9LTF8VHlwZT0z&t=1

 

 

They added just a little more from the August 23rd slides. I don't see any material new info. Could you tell me why you think this is showing Missisipian play is really promising?

[gordoffh]

They added just a little more from the August 23rd slides. I don't see any material new info. Could you tell me why you think this is showing Missisipian play is really promising?

 

My bad. I hadn,t looked at an actual presentation since probably june so i wasn,t really making a comparison to the aug 23. I was making a general statement on the play and was impressed with this presentation. It seemed a little slicker than earlier ones . The progress they are making and howvthey are going to get there is laid out nicely. I suppose i could ask what you see that would reveal the play as being less than presented.

[muscleman]

They added just a little more from the August 23rd slides. I don't see any material new info. Could you tell me why you think this is showing Missisipian play is really promising?

 

My bad. I hadn,t looked at an actual presentation since probably june so i wasn,t really making a comparison to the aug 23. I was making a general statement on the play and was impressed with this presentation. It seemed a little slicker than earlier ones . The progress they are making and howvthey are going to get there is laid out nicely. I suppose i could ask what you see that would reveal the play as being less than presented.

 

Oh yeah. If you say the overall plan sounds good, I agree.

I was burned by ATPG, but SD seems quite different as they are delivering solid production growth inline with their guidance.

However I am still unsure how to value this company. I have some shares but didn't buy heavily because I am not sure how to assign a proper value. A PV-10 of 8 Billion, with current enterprise value of 7 Billion isn't that cheap. Any thoughts?

[Packer16]

The real question is how much is the Mississippian worth?  Right now it's implied worth is less than the value of the land deals and the royalty trust.  Alot of the Mississippian acreage is in the extension with unproven amounts of oil.  See the portion of the presentation where the extension has a much lower well success rate and lower oil flow rate.  I think it is a good deal if the extension has the lower amount of oil per the presentation (2x) but is a home run if the extension has at the level of the core Mississippian (10x).

 

Packer